Debunking AAFA and CA Chamber of Commerce’s Stance on SB62: Here’s What Brands Really Think

California has the largest apparel industry in the U.S., an industry that includes more than 46,000 garment workers and over 4,000 manufacturers and contractors. The California apparel industry is also notorious for its sweatshop working conditions, workers paid by the piece—for as little as three cents per garment—in dirty, dangerous workspaces. By taking advantage of loopholes in California law, brands have been able to avoid responsibility for workers’ wages by contracting for the lowest prices possible to manufacturers, many of whom hire subcontracting factories for even smaller sums, leaving 62% of garment makers to work by the piece for an average of $5.58 per hour, according to the Garment Worker Center. Each year, minimum-wage violations by California employers sap the state’s workforce of nearly $2 billion in earnings, worsening conditions for the financially vulnerable and dragging down the state’s overall economic health, according to nonprofit think tank the Economic Policy Institute.

California Senate Bill 62 (SB62), also known as the Garment Worker Protection Act, addresses wage theft in California’s garment industry by ending the piece rate system, making brands jointly liable with suppliers for ensuring a California minimum wage—$14 per hour at present—for garment makers and closing other loopholes in the law to address transparency and accountability in the supply chain, from the top down.

Debunking The American Apparel and Footwear Association

Steve Lamar, president and CEO of the American Apparel and Footwear Association (AAFA) has come out against SB62. In a letter to California governor Gavin Newsom, he wrote: “The bill, as currently drafted, does not recognize that brands or buyers may have little to no control over how a particular garment factory employer manages their payroll or enterprise finances.”

This statement does not match up with the reality that brands have undue influence on the wages paid to garment workers. In fact, exploitative brand purchasing practices are the heart of the problem. In 2016, the U.S. Department of Labor conducted investigations of 77 randomly selected factories in Los Angeles and discovered labor violations in 85% of factories surveyed. Most significantly, the study showed that poor working conditions were a direct result of the low prices that brands pay factories. According to the Department of Labor, “these results reveal the high underlying rate of noncompliance in the industry that results from the low prices driving the system.” This study found that contract factories receive 73% of the price they need from apparel retailers and brands to be able to pay workers the minimum wage.

Exploitative brand purchasing practices are the heart of the problem. In 2016, the U.S. Department of Labor conducted investigations of 77 randomly selected factories in Los Angeles and discovered labor violations in 85% of factories surveyed.

Lamar’s letter separates brands into good and bad.  “Under this bill, as currently written, Brand Good [any responsible brand] would be liable for any wage claims resulting from Manufacturer Y’s [any manufacturer’s] acceptance of a low-bid contract completely unrelated to its operations…If this provision becomes law, it would drive garment manufacturing out of California and lead to the loss of jobs in California’s garment manufacturing sector, not because companies don’t want to do the right thing, but because there would be heightened risk of being penalized precisely for doing the right thing.”

The letter is misleading. In fact, SB62 expands the investigative authority of the Labor Commissioner’s Bureau of Field Enforcement Officers to investigate and cite violations up the supply chain. Basic due diligence by brands and due process by investigators ensures that only those responsible for wage claims will be held liable.

Debunking THE CALIFORNIA CHAMBER OF COMMERCE

The California Chamber of Commerce asserts that SB62 is a “Job Killer.” The Chamber also claims that SB62 “significantly increases the burden on non-unionized employers in the garment manufacturing industry in California by eliminating piece rate as a method of payment even though it can benefit the employee.”

The reality is that SB62 carves out a specific provision for collectively bargained agreements where unionized workers are able to negotiate for piece rates that translate into a fair wage. Workers who are not unionized do not have the ability to collectively negotiate for fair piece rates. According to SB62’s primary author, California State Senator Maria Elena Durazo, those opposed to the bill “try to say that [being paid by the piece] is an opportunity for some of these workers to make so much more based on their skill, which is not true. The workers have no control over what the piece rate is, they’re never [able to] negotiate what the piece rate is, and if they get to do better, it’s at enormous costs to their bodies and health.”

The notion that brands somehow have no control over what happens in factories is so outdated. And quite frankly, it’s embarrassing that an American trade association would even take this position.

Elizabeth Cline, author, journalist, and director of Policy and Advocacy for Remake, made clear her point of view on SB62—and the opposition to it—at a recent Remake press conference on the subject. The AAFA opposition letter’s assertion that brands have no control over finances in factories, “has been debunked and established over and over and over again.” She cites the US Department of Labor’s investigation into California factories and the fact that the EU is about to establish mandatory human rights due diligence. “The notion that brands somehow have no control over what happens in factories is so outdated. And quite frankly, it’s embarrassing that an American trade association would even take this position. I hope that these groups think about the statements that they’re putting out and change their stance, because we really want to see the United States become a leader in ethical, sustainable business.”

What APPAREL BRANDS Really Think

Since some of the world’s biggest brands are members of the AAFA, Cline has been asking some of them what they think about SB62.

“It doesn’t appear that many of AAFA’s members were even notified before the trade body came out in opposition. I’d also like to add to that some big companies have clarified their position on SB62 for Remake. And while they haven’t endorsed, they have pointed out that they are not in opposition. In some cases, they were not even aware that the AAFA had spoken out against this very basic and fundamental piece of legislation to end wage theft in California.” For example, Patagonia told Elizabeth that they’re not opposed to SB62 and The AAFA statement is “not representative of our company’s position.” Adidas states that they are not involved or engaged in any lobbying related to SB62.

It doesn’t appear that many of AAFA’s members were even notified before the trade body came out in opposition.

Passing SB62 is a necessary step towards growing a strong, ethical fashion industry in California. The bill has over 150 endorsements from industry leaders, more than half of which are minority-owned small and medium businesses, as well as the support of leading brands and manufacturers, like Reformation, Christy Dawn, Saitex, Mara Hoffman, and Boyish Jeans.

Carrie Freiman Parry, Director of Sustainability for Reformation, headquartered in L.A., was also at the recent Remake press conference on SB62. Freiman Parry does not agree with the AAFA that SB62 will drive companies out of California. She says: “supporting SB62 is in line with Reformation’s ethos, centering on sustainability and dignity for the people that make our clothes. It was a really easy decision for us, especially as an L.A. based brand who manufactures approximately 40% of our total production in the Los Angeles area. And we also have our own vertically integrated factory. We support this bill to improve working conditions, and the well-being of garment workers in California.”

Sanjeev Bahl, founder and Chief Executive of Saitex, a Vietnamese-based, Certified B Corp, large-scale denim manufacturer that has recently set up a branch in California, is also a strong supporter of SB62. He was also at the Remake press conference and had this to say about the California apparel industry.

“Wherever Saitex operates, in Vietnam, for example, there’s nothing like a deal system where you can pay somebody a piece rate which could be lower than the minimum wage. What the government of Vietnam says is, you’ve got to pay minimum wage; period. This gray area over here is allowing people to get exploited.” He is very aware that the “gray area” takes greatest advantage of undocumented immigrant garment makers who have little recourse to fight back for their wages.

“A very important piece of the Garment Work Protection bill,” adds Ayesha Barenblat, founder and CEO of Remake and moderator of the SB62 panel, “is that the bill is not in any way doing away with productivity targets. You can have the productivity towards targets, but minimum wage is minimum wage, and you have to pay that minimum wage, and then set up the incentives on top of that.”

Bahl also debunks the myth that SB62 would put employers in the apparel industry, who are already suffering from the financial crisis of the pandemic, out of business or force them to move operations outside of California.

“If there’s anything that 2020 taught us,” says Bahl, it’s that the pandemic “has completely disrupted global supply chains. We live in a world of inflationary trends today.” The pandemic has put costs into perspective. Bahl cites the cost of shipping as an example. “Pre-pandemic, the cost of air freight per kilogram, from the Far East to the United States was about two and a half dollars a kilogram. Today, it’s anywhere between nine, ten and eleven dollars, whatever anybody wants to make up…The cost of a 40 foot container a year and a half ago was two and a half  to $1,000. Today, it’s $11,000. When you ship goods from overseas, there’s a 17.5 to 18% duty factor. So when you start correlating a global reality, with inefficiencies that businesses have accumulated over a period in time, $15 an hour may not be a lot for these fast fashion brands who retail their stuff at nine, ten and fifteen dollars.”

Bahl urges employers to “start looking at costs from a productivity and efficiency standpoint to a business, rather than marginalizing labor and blaming labor for those expensive costs that they accumulate.”

THE COST OF WAGE THEFT TO CALIFORNIA COMMUNITIES

Elizabeth Cline brings up another aspect of cost in the California apparel industry. The Garment Worker Restitution Fund, which was established in 1999 to pay out wage claims to garment workers “is often overwhelmed with hundreds of cases every year of garment workers trying to get paid back. What that means is that it’s often California taxpayers who are having to backfill this fund and fill in these gaps in wages that are owed to garment workers, gaps that really start with the purchasing practices of big brands.” Wage theft is practiced by big companies like Ross, Dress for Less, Fashion Nova, and Forever 21. “It is an outrageous system that these hugely profitable companies are not currently jointly responsible for wage theft. We know from investigations into Los Angeles factories that more than 80% of garment workers in LA have unfortunately experienced wage theft. You really have to do the mental calculation of what that’s meant for the communities that have experienced this for the last two decades. Our garment workers in LA are mostly immigrant women of color. That’s millions of dollars that these communities have been robbed of. And you have to think about the small businesses in their communities that have not been supported because garment workers are not getting paid enough, you have to think about the fact that garment workers are struggling to put their children into school, to put to put food on their table, and really what this community has lost over the years, because they are simply not getting paid what they’re legally owed.”

Our garment workers in LA are mostly immigrant women of color. That’s millions of dollars that these communities have been robbed of.

Freiman Parry agrees. “Many of today’s brands want to pay extremely low prices to manufacture goods and yet have no accountability, despite benefiting from sweatshop wages. I feel like we can’t end wage theft with customer pressure and enforcement alone. We need our laws to protect workers, not just the bottom line of brands. The industry, brands and government need to come together to create a race to the top of production to protect workers throughout the supply chain and joint liability, [part of SB62], is one way to get to the root cause of the issue.”

CONTRIBUTING TO INDUSTRY-WIDE CHANGE

Freiman Parry believes that joint liability can help contribute to the industry wide change “that is desperately needed around the improvement of purchasing practices so brands can take accountability and actually support suppliers in providing decent working conditions.”

Freiman Parry, Bahl, and Cline believe that SB62 is key to the future success of the California apparel industry.

“Passing bills like SB62 is necessary,” says Freiman Parry. “I think these regulations could help establish a new standard of compliance, and help drive decision making for the industry at large. The bill would also help make ethical sourcing the norm in Los Angeles, and I believe would help the local manufacturing industry and its workers thrive, since brands would also have to ensure compliance with all California wage and hour laws and regulations. It would also benefit brands like Reformation, and would give us more opportunities to collaborate with other brands to work together towards ensuring factories are providing healthy and safe working conditions for the men and women who make our clothes.”  She cites examples of collaboration like reducing audit fatigue, investing in management systems, living wage initiatives and strategies. Passage of SB62 could also help “establish California as the epicenter of ethical manufacturing. And hopefully this would also inspire similar legislation around the world. So I think that there’s a lot of benefits for businesses.”

The Garment Worker Protection Act, SB62, moves to a vote by the full California state assembly on August 31st and, if passed, will continue on to Governor Gavin Newsom, who has from September 10th to October 10th to sign the bill. When the bill reaches the governor’s desk, “that’s really when we need a lot of lifting up of SB62,” says Elizabeth Cline.

Let’s get SB62 passed — Tweet to Take Action: